Occupancy levels close to 75% on The Palm

Apartment prices remain flat due to new stock entering the market.

Apartment prices remain flat due to new stock . Rental rates of villas have stabilised and are similar to 2007 levels . (SUPPLIED)
Occupancy levels are running at between 60 and 75 per cent across The Palm Jumeirah’s villas and apartments, according to realtors.
“Occupancy for villas is about 60 per cent while for the Shoreline Apartments, it is currently about 75 per cent,” said Laura Adams, Manager of Residential Sales and Leasing at the head office of Better Homes. “Only about 30 per cent of the people who were living on the Palm moved out because of the economic crisis.”
Mohanad Alwadiya, Managing Director of Harbor Real Estate, said: “According to our estimates, 70 to 75 per cent of the new handovers that happened last year are occupied. We estimate that about 70 to 75 per cent of all the villas and apartments are occupied as well.”

Villa prices on the man-made island have risen by 17 per cent since the middle of 2009, said realtors.

Adams said: “Villa prices appreciated by about Dh300 per sq ft, a 17 per cent increase from the low point in the middle of 2009. Overall sales have still not reached the levels seen in the third and fourth quarters of 2008. Apartment prices remain flat at best – the new stock in the Golden Mile, Tiara Residences, Oceana and Marina Residences is continuing to keep prices down and will do so for some time.”

She said prices for one-beds averaged about Dh1,100 to Dh1,500 per sq ft, and two-beds were about Dh1,000 to Dh1,700 per sq ft. Three-beds averaged about Dh950 to Dh1,500 per sq ft, while four-bed villas were about Dh1,600 per sq ft. Five to six-bedroom villas cost Dh1,900 per sq ft.

“The figures are broad as they include off-plan units in the Golden Mile and Marina Residences. Generally, completed properties such as Shoreline and the recently handed over Golden Mile units with superior views command higher prices.” she added.

Turning to rentals, Adams said a one-bedroom apartment currently costs between Dh100,000 and Dh150,000 per annum.

“Two-bedroom apartments range from Dh130,000 to Dh180,000 per year while three-bedroom apartments range between Dh160,000 and Dh200,000.

Four-bedroom apartments are available from Dh300,000 to Dh450,000 per annum and five-bedroom apartments range from Dh420,000 to Dh600,000.

Six-bedroom apartments are in the region of Dh600,000 to Dh700,000 per annum. For villas, rentals are about Dh280,000 per annum at Canal Cove, Dh350,000 for a garden home and Dh480,000 for a signature villa. In general, villa rates have stabilised and are similar to 2007 rates.”

Alwadiya said the current rental prices for apartments are about Dh90,000 per year for a one-bed, Dh130,000 for a two-bed, Dh160,000 for a three-bed and Dh250,000 for a four-bed.

“The Palm Jumeirah is one of the few projects in Dubai that managed to weather the economic crisis well, though villa prices witnessed a drastic decrease in the first and second quarters of 2009.

“For example, a garden home that was being sold for about Dh11m in 2008 suddenly fell to Dh7m. But in the third quarter of last year, the prices of villas started to pick up again and now the same garden home would not be offered for less than Dh9m.”

According to Better Homes, the Palm has a mix of end-users and investors, with declining rental yields tilting the balance in favour of the former. Adams said: “High maintenance fees are affecting net rental yields and since there are other options available elsewhere in Dubai this could impact interest in The Palm Jumeirah. Nationalities are mixed, but residents are mainly East European or Asian.”

Alwadiya said: “The buyer profile used to be dominated by GCC nationals, Russians and South Asians but now you find many different nationalities.”
He said that maintenance charges on the Palm apartments were in the range of Dh14 to Dh17 per sq ft.

“Charges for villas on the Palm are among the highest at about Dh4 to Dh5 per sq ft,” he said. “In effect, the owner of a two-bedroom apartment of about 1,800 sq ft will need to pay about Dh28,800 annually, assuming the charges do not increase yearly.”

First monorail in the Middle East

The Palm Monorail, which was inaugurated in April 2009, was the first monorail project to be constructed in the Middle East, says Nakheel.
It was developed by a consortium of leading international companies. The track runs between Gateway Station at the trunk of the Palm and Atlantis Aquaventure Station on the crescent.

It will eventually be linked to the Dubai Metro following the introd-uction of the Roads and Transport Authority’s Al Sufouh tramline, with direct links to Dubai International Airport and other key transport hubs.

Home to 12,000 residents

About 2,150 families are living in the Shoreline Apartments, said Nakheel, the Palm’s master developer. It added: “Around 800 families are living in the villas on the fronds. The villas, Shoreline Apartments and Marina Residences, are the only homes developed by Nakheel on The Palm Jumeirah. The rest of the residential offerings are being developed by third-party developers,” said a company spokesperson.

The Marina Residences complex at the tip of the Palm’s trunk consists of six towers with 940 apartments and penthouses. A further 40 townhouses stand on a marina-fronted promenade.

Mohanad Alwadiya, Managing Director of Harbor Real Estate, said four residential projects were handed over last year – Tiara Residences, Oceana, Marina Residences and the Golden Mile.

He said 644 Tiara apartments and penthouses were delivered last year and six freehold luxury residential buildings with 858 apartments and 12 penthouses were handed over at Marina Residences. The marina development also includes 30 townhouses.

The Golden Mile Residences project comprising 10 waterfront buildings, and 780 freehold apartments – ranging from one-bedroom units to penthouses and townhouses – were delivered last year. Apartments and penthouses at Oceana’s seven buildings are now being handed over.

The Nakheel official said: “The Palm Jumeirah is now home to more than 12,000 residents and this figure is set to rise as more and more take up occupancy at the island’s various residential developments. There are approximately 1,500 villas on the fronds.”

Nakheel says the Palm has attracted buyers from Chile to China and New York to Nepal, with the first residents moving into the 4,000 villas and apartments completed at the end of 2006.

مهند الوادية المدير الإداري في “هاربور” في ح

مهند الوادية المدير الإداري في “هاربور” في حوار مع “الخليج”

مواقع القوة تتغير في السوق العقاري لصالح المشترين

أوضح مهند الوادية، المدير الإداري في شركة “هاربور” للوساطة العقارية، أن السوق العقاري شهد في الفترة الماضية تغيراً دراماتيكياً مهماً من حيث مواقع القوة بين طرفي معادلة البيع والشراء وتأثيرهما في العملية الديناميكية للقطاع، ففي الوقت الذي كانت فيه الكلمة الأولى للبائعين والمطورين من مواقعهم القيادية، إلا أن السيناريو اختلف الآن لتتحول كفة الميزان لصالح المشترين الذين أصبحوا أكثر دراية وعلماً ووعياً للقيمة المرادة مقابل المبلغ المدفوع، وأصبحت توقعاتهم من شركات الوساطة والوسطاء العقاريين أعلى من أي وقت مضى.

وأضاف الوادية في حوار مع “الخليج”، أن عدد شركات الوساطة العقارية والوسطاء غير المرخصين قد تقلص بشكل كبير وذلك لعدم قدرتهم على مواصلة عملياتهم في ظل الأزمة. ولقد تعلمت الشركات والمؤسسات والحكومات العديد من الدروس القيمة خلال الأشهر 12 – 14 الماضية، والتي تتعلق بوضع خطط العمل، وخدمة العملاء، والإدارة المالية وتنمية الموارد البشرية.

وسيتميز العام 2010 بالنضج والتركيز، فالشركات العقارية بشكل عام وشركات الوساطة بشكل خاص التي استطاعت أن تصمد في وجه الأزمة الاقتصادية ستصبح أكثر حكمة وقوة وتركيزاً كما ستتوفر لها المزيد من الفرص التي يمكن انتهازها، بينما تستمر الاقتصادات العالمية والمحلية بالانتعاش.

وفي ما يأتي نص الحوار:

* كيف تقيّمون الوضع العام لقطاع الوساطة العقارية في السوق المحلي؟

بالرغم من السيل الهائل من المقالات والآراء التي تتوقع مدى سوء الحالة الاقتصادية وتهولها، بالإضافة إلى تلك التي تعلن عن تدهور أسعار العقارات وارتفاع خسائر المطورين والمستثمرين بالأضعاف، لم يعط الإعلام اهتماماً كافياً لوضع قطاع الوساطة العقارية الحالي، أو للعدد القليل المتبقي من شركات الوساطة العقارية والتي لا تزال صامدة في وجه الأزمة الاقتصادية”.

وشهدنا ما قبل العام 2009 دخول العديد من الأشخاص من خلفيات وخبرات مختلفة إلى قطاع الوساطة العقارية، وذلك بسبب ما قدمه القطاع من عمولات سهلة ومغرية. ولا بأس بذلك، فليس خطأ أن تكون لدى الشخص الرغبة في تحسين مكانته المادية أو الاجتماعية (بصورة قانونية طبعا)، ولكن العديد منهم ظن أن مهاراتهم الشخصية أكثر من كافية لتحقيق النتائج المطلوبة”.

وشهد العام ،2009 تقلص عدد شركات الوساطة العقارية والوسطاء العقاريين غير المرخصين بشكل كبير وذلك لعدم قدرة الوسطاء العقاريين وشركات الوساطة الضعيفة على أن تواصل عملياتها في ظل الأزمة. ولقد تعلمت الشركات والمؤسسات والحكومات العديد من الدروس القيمة خلال الأشهر 12 – 14 الماضية، والتي تتعلق بوضع خطط العمل، وخدمة العملاء، والإدارة المالية وتنمية الموارد البشرية.

وسيتميز العام 2010 بالنضج والتركيز، فشركات الوساطة العقارية التي استطاعت أن تصمد في وجه الأزمة الاقتصادية ستصبح أكثر حكمة وقوة وتركيزاً كما ستتوفر لها المزيد من الفرص التي يمكن انتهازها، بينما تستمر الاقتصادات العالمية والمحلية بالانتعاش. ونحن في “هاربور” نعتقد أنه إذا ما سارت الأمور بشكل مختلف، وتبنت الشركات فلسفة تتمحور حول خدمة العملاء واتبعت نهجاً مبنياً على حقائق مثبتة، بالإضافة إلى وضعها أهدافاً وقيماً مستمدة من تقييمات موضوعية، فسيصبح توافر فرص النجاح والتطور في قطاع العقارات في الإمارات أمراً مؤكداً.

* هل وصل قطاع الوساطة العقارية إلى المستوى الذي يمكنه من المنافسة على الصعيد العالمي؟

بينما ينضج سوق العقارات في الإمارات خلال الأزمة الاقتصادية الأولى في تاريخه، ستتغير طبيعة بيع وشراء العقارات بشكل غير رجعي وستظهر معها العديد من الاتجاهات الجديدة في القطاع، منها، عدم رضا الزبائن عن مستوى الخدمات التي يقدمها الوسطاء العقاريون. فوفقاً لدراسة حديثة أجراها فريق “هاربور” للوساطة العقارية، تبين أن 61% من المستهلكين الذين اشتروا عقارات خلال العامين الماضيين عبروا عن استيائهم من أداء الوسطاء العقاريين والخدمات التي يقدمونها، وأن ما نشهده هو مؤشر إلى أن الوسطاء العقاريين بحاجة إلى تحسين مستويات الخدمة ليتمكنوا من الصمود خلال وبعد الأزمة الاقتصادية. ويبدو أن الحلقة الأضعف هي النقص في مستوى الكفاءة الاستشارية الفعّالة القائمة على أسس المعرفة السليمة في السوق العقارية وفهم متطلبات المشترين.

والمشترون اليوم لهم حرية الاختيار ولديهم خبرة أكثر في السوق، وهم يطلبون النصيحة من المهنيين الذين بإمكانهم الوثوق بهم، ولكن للأسف، وفي معظم الحالات، يجد المشترون أنفسهم في مواقف مخيبة للآمال، حيث إن عدم الثقة يولد العديد من التحديات أمام الوسطاء العقاريين، ومن أهمها: عدم منح المشتري الوسيط العقاري الحقوق الحصرية لبيع أو تأجير العقار، طرح المشترين العديد من التساؤلات حول العمولة القانونية التي يستحقها الوسيط، بالإضافة إلى الانطباعات والأحكام السلبية المسبقة والتي تؤثر في العلاقة بين العميل والوسيط العقاري.

ولكن الخبر الجيد هو وجود هيكل قانوني ينظم عمل مهنة الوساطة العقارية والذي يتم تطويره بشكل دائم من قبل السلطات المختصة، التي بدورها تمارس الضغط على شركات الوساطة التي لا تزال تتكاسل في تحسين مستوياتها. وإن الدور الذي تلعبه الهيئات المختصة مهم جداً في رفع مستوى ممارسات القطاع وسمعته لتصل إلى المستويات العالمية.

* ما جوانب القوة والضعف في قطاع الوساطة العقارية؟

إن مصدر القلق الرئيسي لقطاع الوساطة العقارية هو أن المشكلات والآثار السلبية التي برزت خلال مرحلة الطفرة لم تؤثر في الوسطاء العقاريين غير القانونيين والسيئين فقط، بل أثرت في مهنة الوساطة العقارية وسمعة القطاع ككل. ولا يزال لدى العديد من الناس نظرة سيئة تجاه الوسطاء العقاريين وسيلزم الكثير من الجهد والعمل الجاد والالتزام لعكس هذه الصورة.

* ما أبرز التحديات التي تواجه شركات الوساطة العقارية والعاملين فيها؟

كان قطاع العقارات في السابق قطاعاً يتحكم فيه البائعون، ولكن السيناريو يختلف جذرياً في بيئة اليوم، فقد أصبح المشترون أكثر دراية وعلماً ووعياً للقيمة المقدمة وأكثر تطلباً للحصول على القيمة المرادة مقابل المبلغ المدفوع، وأصبحت توقعاتهم من شركات الوساطة والوسطاء العقاريين أعلى من أي وقت مضى. باختصار، إنهم يبحثون عن خدمة عملاء أفضل وأكثر فاعلية من حيث المضمون والنتائج، فعلى الوسطاء العقاريين الآن العمل بجد وبذل المزيد من الوقت والجهد لإعادة كسب ثقة المشترين والبائعين، وعليهم الإدراك أن النجاح الحقيقي والمستدام يأتي من العملاء الأوفياء.

* ما أهم مطالب القطاع من حيث القوانين والتشريعات والأمور التنظيمية؟

قطعت دبي شوطاً طويلاً في ما يتعلق بتنظيم قطاع العقارات. وفي حين أن الجهود الرامية إلى حماية الحقوق، ورفع المعايير المهنية ووضع إطار عمل شفاف وموثوق به تستحق الثناء، لا يزال هناك طريق طويل لنقطعه قبل أن يصل القطاع إلى مراحل النضج الأخيرة. ويعد نظام تصنيف الوسطاء العقاريين الذي قدم مؤخراً، والتعاون بين “مؤسسة التنظيم العقاري” و”وزارة العمل” لتصنيف مهنة الوساطة العقارية كفئة منفصلة، وبرامج التدريب المستمرة والتطوير المهني التي يقدمها معهد “كلية دبي العقارية” خطوات مهمة نحو الاتجاه الصحيح. ولكن، لن تحقق الجهود التي تبذلها “مؤسسة التنظيم العقاري” الأثر المطلوب ما لم تتبن شركات الوساطة العقارية “الواقع الجديد” للقطاع وتتبنى أيضاً منهجاً جديداً يتماشى مع التغيرات التي يشهدها القطاع العقاري وقطاع الوساطة العقارية.

كما أن ما مر به القطاع كان لمصلحته، فقطاع العقارات في الإمارات سيصبح أكثر قوة وحكمة وتنظيماً نتيجة لسلسلة الأحداث التي وقعت منذ بداية الأزمة، بالإشارة إلى أن خدمة العملاء هي المفتاح الرئيسي لنجاح مقدمي خدمات الوساطة العقارية، وهو العامل الذي يحدد نجاح أو فشل أي شركة. وذلك لأن جميع العمليات التجارية، وأقسام التسويق والمبيعات والتأجير والبيع والأرباح والعوائد تعتمد كلياً على العملاء.

High service charges hit rental yields

Service charges for some properties in Dubai range between 18 per cent and 48 per cent of annual rents, according to a recent report by Investment Boutique (iB). Further, falling rents coupled with high service charges are contributing to lower rental yields for an investor in Dubai.

Real estate analysts also said that developers in Dubai were not necessarily following the service charges set out by the Real Estate Regulatory Agency (Rera). “We don’t see all the developers abiding by the service charges set out by Rera. For example, the rate for luxury-serviced apartments should be around Dh50 per square foot yet some luxury projects in Downtown Dubai are charging Dh63 per square foot,” said Mohanad Alwadiya, Managing Director, Harbor Real Estate.

Meanwhile, iB in its latest fourth-quarter report – Market Pulse – said developers of some properties in Dubai continue to charge high service fees despite the Rera regulating service charges in the emirate.

“A 1,000 square feet one-bedroom unit in Discovery Gardens at Dh24 per square foot amounted to service charges of around Dh24,000. Current average rents are Dh52,300, which means that service charges constitute an exorbitant 46 per cent of rents. What this does to an investor’s rental yield is but obvious,” said Heather Wipperman Amiji, CEO, Investment Boutique.

According to Alwadiya, high service charges coupled with falling rents can reduce the rental yields for an investor. “High service charges can burn up the capital appreciation and annual rental yields for end-users and investment buyers.”

Elaine Jones, CEO, Asteco Property Management said: “Currently Although we have seen rents stabilise over the past three months, it is also possible that as developments settle and the true level of maintenance and upkeep is determined that service charges will soften. Different owner occupiers also have varying levels of expectation with regards to security, common area cleaning, landscaping etc. and whilst initially the most cost effective route is chosen in the medium to long term a recognition of the added value that a well cared for and maintained property can bring or add to the sale or rent value is significant.”

She said that property in New Dubai is subject to master community charges in addition to local community service charges and property maintenance.

The impact of service charges has been felt throughout Dubai with developers facing concerns from property owners on the high service charges and perceived low quality of service.

In the case of apartments, service charges constituted between 15 per cent and 32 per cent of rents in the first quarter of 2008. Downtown Dubai and The Green Community charge the highest service fees in the apartment and villa category respectively, with Jumeirah Lake Tower (JLT), Arabian Ranches and Emirates Living being the cheapest.

According to the report, service charges also vary substantially from community to community with JLT currently the most attractive to investors as service charges are between 21 and 23 per cent of rents. Developments such as Dubai Marina, Palm Jumeirah and Burj Khalifa have relatively higher service charges.

With charges remaining more or less stable and rents declining substantially, service charges now constitute between 18 per cent and 48 per cent of annual rents.

Discovery Gardens, a mid-end development with modest facilities called into question the rationale behind high service charges. Owners organised themselves in an effort to force the master developer to reduce the charge. However, they met with limited success as the final rate was reduced by Dh5 per square foot.

Previously in 2008, there were increases across the board with Emaar’s Arabian Ranches doubling, Union Properties’ Green Community also witnessing a 50 per cent rise. The reasons cited included initially subsidised charges, rising labour costs, increasing costs of utilities, such as electricity and water, and inflationary pressures on raw materials.

In December 2008, Salwan, a subsidiary of Dubai Properties and the property management company for Jumeirah Beach Residence, upped service charges at the beachfront community by 129 per cent from Dh9.5 per square foot to Dh21.75 per square foot. In February 2009, Salwan reduced the service charges to Dh15.32 per square foot. Soon after this, owners of units in Nakheel’s Discovery Gardens also realised that their own service charges were well above market rates at Dh29 per square foot, almost double of Jumeirah Beach Residence, with fewer facilities.

Lack of clarity

According Investment Boutique, there continues to be a lack of clarity and solutions with respect to service charges in Dubai. The Strata Law has yet to be ratified, owners’ associations are slow to set up, developers and property management companies continue to charge unjustified rates even with Rera trying to control the increases. Owners and tenants continue to be dissatisfied with the level of service received.

The iB report said some MEP (mechanical, electrical and plumbing) and facilities management professionals speculate without reference to any specific project that the high service fees quoted may be the actual cost of the service provided, but they are unnecessarily high due to poor selection of equipment and materials at project inception as well as a poor maintenance programme.

FM consultants

Including facilities management (FM) consultants at the design stage helps save substantial costs over the life of a building. As the market begins to open to investors, more are interested in the rental yield than capital appreciation. These buyers should also invest in FM advisory services to ensure that running costs to date have not been kept artificially low.

Analysts outlined the various reasons for service charges for villas to be higher than those of the apartments. According to Harbor, service charges for villas are low mainly due to the fact that service charges for villas are calculated based on the plot area of the villa. “In addition, villa communities have less MEP and other common elements in villas compared to apartments,” said Alwadiya.

Jones said: “District cooling, housing tax and Dubai Electricity & Water Authority (Dewa) costs are usually borne by the occupier. Traditional Dubai property that we have managed as full block management will have cost between 20 per cent to 30 per cent of rent income, dependent on air-conditioning, age of building etc. New Dubai property is a little higher due the additional Master Community Charge.”

“Rera reviews and approves the service charge assessed by the home owners association. Rera is also involved in the apportionment of area charges where there is a mixed-use development. The costs that make up the service charges are transparent and the home owners association will usually collect three quotes for each service line so as to ensure that the most competitive rate is secured – bearing in mind always that cheapest is not always best.”

Utility costs will be estimated in the first year based on advice from consultants. The second year’s service charge may well be more accurate than the first as the level of service required and the actual consumable costs are defined. “Service charges are for the common areas of which villas have far less of. Most villa plot and property maintenance costs are individual costs and not shared. The roads, street lighting, landscaping, garbage collection are the only shared amounts,” said Jones.

In case of villas, the service charges are charged on the basis of the plot size. The case of villa service charges differ completely from the fees, accounting for between three and nine per cent of rents, except for The Green Community, which is relatively more expensive. The huge difference in the service charges between apartments and villas is due to a typical building budget.

Villa service charges are substantially lower when compared to apartments as there are fewer common areas to maintain. Security, landscaping and the upkeep of pools and lakes are covered by the service charges, but municipality fees are paid separately and maintenance of the individual villa is the owner’s responsibility.

Chilled water for common areas accounts for a third of maintenance costs, other utilities account for one-sixth and the master community charge accounts for one-tenth for the average property.

A typical breakdown of other costs includes soft services such as pest control, façade cleaning and swimming pool cleaning and treatment, while subcontractor services and repairs cover the emergency lighting system, aviation warning lights, water tank cleaning, automated doors, building management unit (cradle) and its certification, building management system (BMS), fire alarm system, fire protection system, generator, CCTV, access control system, apartment intercom, public address system, lighting control system and gym equipment.

Majority of expenses are specific to apartment blocks and not to villas, which explains the difference. Variations in service charges needs to be taken into consideration by investors choosing between apartments and villas as this could impact both rental yields and capital appreciation. The report also called for more clarity from the developers and property management companies with respect to the manner in which funds are used. It is hoped that once the Strata Law is introduced, owners’ associations will have a say in the matter and the resulting transparency will only benefit the Dubai property sector.

The last quarter of 2009 was when the optimists had predicted that recovery would happen.

“According to our analysis of the market, we still have some time to go before we see recovery in the UAE property sector, especially in Dubai,” said Amiji.

Transactional activity

The majority of transactional activity in 2009 occurred in the completed property sector. The off-plan market has seen very little transactional activity at all during this time period and as such has not effectively been re-priced.

If off-plan projects are completed and enter the market en masse there will need to be an asset re-pricing in terms of rental values and capital values, which will also have an impact on the local market. However, by the end of 2010, we expect some stabilisation as there will likely be more certainty in global markets and local exposure to bad loans. Over the course of the year, project stakeholders are likely to take stock of their situation and either cancel projects with little economic value in the new market of 2010 and absorb the write-offs or allow the supply to come on stream and let the market adjust accordingly.

Residential affordability is key

While rents and sale prices have suffered considerably in Dubai, declining by more than 50 per cent, Abu Dhabi has proven more resilient with rents estimated to have fallen by 23 per cent between the first and last quarters of 2009. Even though Abu Dhabi faces an undersupply, rents have fallen due to factors such as redundancies and job insecurity, the substitution effect of Dubai’s more affordable housing market, and limited selection of high quality or easily accessible units due to the abundance of construction and infrastructure activity.

While sale prices have also been moving downward, properties close to completion on Al Raha Beach and on Al Reem Island have managed to trade at premiums to opening prices although these have fallen between 30 per cent and 46 per cent respectively from their 2008 peaks.

Downward pressure on rents

The greatest contributing factor to the downward pressure on rents in the Abu Dhabi market has been the mismatch between Abu Dhabi income levels and rental values.

There is a lack of affordable property for the majority of people in the emirate. Prices and rents will continue to fall until they reach the level at which the average middle income or upper income end-user can comfortably rent property, assuming an international benchmark of 25 per cent of income on housing expense, or comfortably purchase property assuming a benchmark of 30-40 per cent of income spent on mortgage payments.

As such, excluding the last two categories, which account for 29 per cent of Abu Dhabi’s population, rents in Abu Dhabi are not affordable to the majority 71 per cent of the population, and thus there is a downward pressure on rents in Abu Dhabi given Dubai’s substitution effect.

According to the analysis, affordable unit prices average around the Dh1,000 mark. While prices were reduced substantially in 2009, a further decline is required to bring prices in line with income levels, especially given the fact that average prices in the neighbouring Dubai are currently lower than the Dh1,000 mark.

Developers will need to keep this in mind while pricing new products

Rera’s colour-coded norms will not impact agent commissions

Agent commissions will not be impacted under the colour-coded system introduced by Dubai’s Real Estate Regulatory Agency (Rera) whereby brokers are authorised to sell a particular type of property in a specified area, according to realtors.

Natasha Pereira, Area Manager-Dubai, Sherwoods Property Consultants, said: “Areas such as Discovery Gardens, International City and Dubai Silicon Oasis generate lesser revenue than others. For agents who have been assigned these areas, we also give them (parts of) other areas to handle the sales and rentals as well.”

She added: “Our agents are already classified into specific areas and asset classes.” While some real estate consultancies said they were already segregating the functions of a real estate agent based on specific areas and asset classes, others felt now was not an opportune time to introduce the colour-coded system.

Avais Najam, Managing Director, Venture Horizon Real Estate, said: “There is already an oversupply of real estate brokers in the market since business activity is yet to pick up in Dubai. Further, most brokerage firms continue to employ real estate agents on a commission-only basis, rather than enrolling them in their companies.” He added many brokerage firms and agents were unaware of rules that require a colour-coded system and have sought more clarity on the system’s implementation from Rera.

Najam said: “We are already segregating our real estate agents on the basis of the territories they work in. Most of our agents follow a specific territory.”

Mohanad Alwadiya, Managing Director, Harbor Real Estate, said: “At the moment we are not ready for renewals of our agents. However, we have been following our own policies similar to that set out by Rera. All our agents follow the system. For example, for handling Dubai Media City, Internet City and Tecom areas, we have one designated person since these are all free zone areas. We also have a specific division that specialises in office space.”

In September, Rera announced the four-tier broker classification system whereby brokers were granted one of four types of licences authorising them to sell property of a particular type or in a specified area.

Under the new colour-coded classification, tier one brokers, those issued a blue licence by the Department of Economic Development (DED) and registered with Rera, will be allowed to carry out all types of brokerage activities and operate throughout the emirate, including free zones if authorised to do so by the authority. These have the widest sphere of operation.

Tier two or yellow licences will be issued by the appropriate free-zone authorities to carry out the full range of brokerage activities but will be registered to operate only within “designated” freehold areas owned by that authority. The tier three registered brokers, having green licences, will be authorised by the DED and registered by Rera, to sell only properties of specific companies or developers. The last tier of licenced brokers will be issued a red licence to promote, sell or rent time-share units.

This move by Rera is a step towards regulating professional services in the sector and enhancing rights of buyers, sellers and tenants. The agents also called for the “Agent Trust Account” to be put in place at the earliest to help further regulate the brokerage industry.

Broker firms in Dubai current employ legal firms to oversee some transactions into the account and help them manage accounts in cases where deposits may have been taken by the agent from the customer.

Najam said: “For us, all the commission earnings go into an account and in cases where we receive a deposit, we take on a solicitor to safeguard the client’s deposit money and see to it that it is secured and the transaction made is accurate.

“We sometimes take a deposit of about five per cent to 10 per cent to lock in a client. The deposit money can either be in cash or cheque. In such a scenario, we usually have a solicitor on board to ensure the transaction is valid.”

According to Alwadiya, Harbor Real Estate has hired a professional legal firm to audit its transactions.

Oil field should boost sector

The discovery of a new offshore oil field is likely to boost Dubai’s economy, although its impact is hard to gauge until its volume is determined, say real estate executives.

With production to begin in 2011, they think the resulting hike in revenue could boost infrastructure development.

“It is hard to tell what impact this will have until we get more information on this,” says Charles Neil, CFO of Landmark Properties. “Then we can judge the impact it will have on finances and infrastructure. More money flowing into the economy will be a positive development. There would be an increase in people to work in production and housing, and revenue flowing in for infrastructure but without barrels per day it’s hard to say.”

Mohanad Alwadiya, managing director of Harbor Real Estate, says the discovery should boost investor confidence, but adds this largely depends on the oil field’s output.”This positive effect will surely rub off on the property market,” he adds.

“Irrespective of the capacity, it can only add to Dubai’s income stream,” says Aditya Awtani of Fine and Country. “The mantra ‘buy on the rumour and sell on the news’ has worked well for many equity traders. However, in the real estate market, especially one that has dropped significantly, investors naturally shall remain on the sidelines until there’s concrete data.”

As the oil field’s production picks up, it will have a positive effect on the property market as well, says Aditya.

“Experts are predicting approximately 10,000 barrels could potentially be pumped via the Al Jalila oil field. If this is to be believed, that would imply, at today’s oil prices, an additional $270 million for Dubai.” This would help reduce the emirate’s budget deficit, he adds.

Abu Dhabi villa prices expected to slide further

Sale prices and rentals of villas in Abu Dhabi are likely to drop as fresh supplies are entering the market and a number of people are shifting to live on the outskirts of Dubai due to its “affordable rates”, said real estate officials.

Already villa prices have dropped in various projects. “We expect this trend to continue during 2010 as more units are expected to be handed over and the number of people relocating from Abu Dhabi to ‘more affordable’ Dubai continue in the short- and medium-terms,” said Mohanad Alwadiya, Managing Director, Harbor Real Estate.

Currently, in Al Reef Villas a two-bedroom villa goes for Dh1.1 million, a three-bedroom villa for Dh1.6m, a four-bedroom villa for Dh1.7m and a five-bedroom unit for Dh2.3m.

“Villa prices in Abu Dhabi are starting to soften as more units start to flow into the market. This trend has affected the attitude of landlords and sellers and has forced them to be more flexible when it comes to price points and payment terms,” said Alwadiya.